Investigate Big Congress, Not Big Oil

With gasoline prices exceeding $4 a gallon in some states, politicians are
responding as usual: Blame Big Oil First. Several prominent senators have once
again summoned industry leaders to Capitol Hill, subjecting them to yet another
barrage of rhetorical questions, interruptions, accusations, and sermons. The
lawmakers' goal, claims Sen. Patrick Leahy, is to identify "causes of the rising
price of oil on which Congress can act." But the foregone conclusion is that "price
gouging," "collusion," and "market manipulation" by Big Oil, or speculation
by financiers, is responsible.

The simple fact that such Congressional investigations are designed to obscure
is that the prices of oil and gasoline are determined by supply and demand--which
neither private oil companies nor speculators have any power to dictate in
their favor. If they had such market mastery, then why didn't they use it in
the 1990s, when gasoline was selling at a barely profitable $1 a gallon? To
be sure, speculators can bid up prices--but they only do so when they believe
that oil will become even more expensive in the future, and only make money
when they are right.

The question Congress should really be asking, then, is: What nonmarket factors
are distorting supply and demand? If they sought an honest answer, they would
discover that much of the blame lies with Congress itself.

No one disputes that environmentalist laws passed by Congress have cut off
some of our most promising and plentiful sources of oil. In the name of safeguarding
a tiny portion of caribou habitat in the Alaskan wilderness, drilling is prohibited
in the Alaska National Wildlife Refuge--a potential source of 1 million barrels
a day, 5 percent of America's daily oil consumption. Also off-limits is 85
percent of America's coastline, which Shell estimates contains some 100 billion
recoverable barrels--13 times America's annual oil consumption--and the vast
majority of oil shale in Colorado, which Shell estimates at 1.5 trillion barrels.

Congress should publicize these facts, prepare an inventory of how many oil-rich
areas they have blocked off, and bring in economists to estimate how much all
of this raises gas prices.

And how about the effects of Congress's open hostility toward the future of
oil? Our politicians damn oil as an "addiction" to be eliminated, and seek
to cut--by up to 90 percent--the use of oil and other vital fossil fuels that
make our standard of living possible. Congress should ask oil executives how
this possible forced cut in demand affects their industry. It should ask whether
they feel safe to make the billion dollar investments and decades-long plans
that oil production requires when Barack Obama, a leading presidential candidate,
can uncontroversially proclaim that "the country that faced down the tyranny
of fascism and communism is now called to challenge the tyranny of oil." Is
it a coincidence that the much-maligned speculators think oil will become even
scarcer in the future, and are acting accordingly?

In addition to investigating its own impact on gasoline prices, Congress should
investigate how its economic policy partner, the Federal Reserve, has raised
our gas prices by lowering the value of the dollars we buy gasoline with. The
Fed, along with the Treasury Department, has for years had an inflationary
policy that has caused the value of the dollar to plummet relative to other
currencies. Were it not for this devaluation of the dollar, oil prices would
likely be 40 percent lower--as they are for those on the Euro. Why not call
a free-market economist to the stand and ask how much more expensive Alan Greenspan,
Ben Bernanke, and Henry Paulson have made our gasoline?

Americans deserve to know the story--in all its gory detail--of what their
government has done and is doing to cause high prices at the pump, and to make
gasoline -- indeed, all energy -- more scarce and more expensive in the future.
A congressional investigation of Congress would be a great public service.

Alex Epstein is an analyst at the Ayn
Rand Institute, focusing on business issues. The Institute promotes Objectivism,
the philosophy of Ayn Rand -- author of "Atlas Shrugged" and "The Fountainhead."

Alex has a BA in Philosophy from Duke University and was
the editor and publisher of The Duke Review for two years. He is a contributing
writer for The Objective
Standard, a quarterly journal of culture and politics. His articles
there include "'Just
War Theory' vs. American Self-Defense," co-authored with Yaron Brook. His
Op-Eds have appeared in such publications as the Detroit Free Press, Houston
Chronicle, San Francisco Chronicle, Philadelphia Inquirer, Chicago Sun-Times,
Atlanta Journal and Constitution, Arizona Republic, Canada's National Post,
Indianapolis Star, Orange County Register, Tampa Tribune, and the Washington
Times. Mr. Epstein has been interviewed on numerous nationally syndicated
radio programs on business topics such as income inequality, media and internet
regulation, oil industry profits, social security and the FDA.